The success of acquisitions: evidence from divestitures

Article Abstract:

This paper studies a sample of large acquisitions completed between 1971 and 1982. By the end of 1989, acquirers have divested almost 44% of the target companies. We characterize the ex post success of the divested acquisitions and consider 34% to 50% of classified divestitures as unsuccessful. Acquirer returns and total (acquirer and target) returns at the acquisition announcement are significantly lower for unsuccessful divestitures than for successful divestitures and acquisitions not divested. Although diversifying acquisitions are almost four times more likely to be divested than related acquisitions, we do not find strong evidence that diversifying acquisitions are less successful than related ones. (Reprinted by permission of the publisher.)

Analysis, Acquisitions and mergers

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How costly is financial (not economic) distress? Evidence from highly leveraged transactions that became distressed

Article Abstract:

This paper studies thirty-one highly leveraged transactions (HLTs) that become financially, not economically, distressed. The net effect of the HLT and financial distress (from pretransaction to distress resolution, market- or industry-adjusted) is to increase value slightly. This finding strongly suggests that, overall, the HLTs of the late 1980s created value. We present quantitative and qualitative estimates of the (direct and indirect) costs of financial distress and their determinants. We estimate financial distress costs to be 10 to 20 percent of firm value. For a subset of firms that do not experience an adverse economic shock, financial distress costs are negligible. (Reprinted by permission of the publisher.)

Research, Financial management, Leverage (Finance), Leverage, Bankruptcy, Default (Finance)

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Private equity performance: returns, persistence, and capital flows

Article Abstract:

A study on returns, capital inflows and consistency in performance of private equity funds is presented.

United Kingdom, Forecasts, trends, outlooks, Financial management, Finance, Financial analysis, Company financing, Industry forecasts, Private equity funds

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